Former Valeant, Philidor executives found guilty

Fraud, bribery and money laundering

Former Valeant Pharmaceuticals International

Inc. executive Gary Tanner was found guilty of accepting a US$10 million bribe for manipulating the company’s takeover of a startup mail-order pharmacy in 2014.

Ex-Philidor Rx Services chief executive Andrew Davenport, who paid the kickback, was also convicted Tuesday after a three-week trial. The jury verdict in Manhattan federal court is the latest fallout from a scandal that shook the drugmaker three years ago.

Neither man showed any emotion as the verdict in the fraud and money-laundering case was read in court. Sentencing is scheduled for Sept. 19. They face as long as 20 years behind bars on four counts including wire fraud and conspiracy to commit money laundering.

“We are, of course, disappointed in the verdict, but we look forward to addressing the many legal and evidentiary issues on appeal,” Tanner’s lawyer, Howard Shapiro, said in a statement. Davenport and his lawyer, Jonathan Rosen, declined to comment.

The case, filed in 2016, helped explain how Valeant became linked to Philidor, which the pharmaceutical giant secretly controlled and used to increase sales. Valeant disclosed the link in October 2015, beginning a long fall in the share price, sparking questions about its transparency and business model, and leading to accounting restatements and the exit of top management.

Lainie Keller, a spokeswoman for Valeant, didn’t immediately return a call for comment.

Tanner managed Valeant’s relationship with Philidor, which sold the company’s drugs. He was also tasked with finding other mail-order pharmacies with which Valeant could do business, to prevent the drug manufacturer from relying too heavily on Philidor.

Instead, the U.S. said, Tanner steered more of Valeant’s business to Philidor’s Pennsylvania facility from 2013 to 2014 and worked with Davenport to secretly block the efforts of other mail-order pharmacies to get a share of Valeant’s business.

Prosecutors told jurors that Tanner was Davenport’s “man on the inside” at Valeant, a “double agent” who used an alias email account and bogus business cards to communicate with Davenport about the scheme and tip him off about his employer’s plans.

The alleged scheme increased the value of Philidor to Valeant, which agreed in December 2014 to pay more than US$100 million for the option to buy Philidor in 10 years.

The deal gave Davenport a US$40-million windfall, a quarter of which was secretly funnelled to Tanner through offshore accounts the men set up, according to prosecutors.